3Q Commercial Real Estate Update

Things are a little rosier in the commercial and multi-family sector. The MBA reports that in the 3rd quarter loan originations came in 98% higher than during the same period last year and 10% higher than the second quarter. “Mortgage originations by life company portfolios hit another new record in the third quarter,” said MBA Vice President of Commercial Real Estate Research Jamie Woodwell. “Lending by bank portfolios and Fannie Mae and Freddie Mac also picked-up.” Hotels, retail properties, office space, multifamily, industrial, etc. are all included in the numbers.

Barclays Capital noted that:

The survey numbers support our view that originations will continue to increase in the near term, though growth will be sluggish and concentrated outside the CMBS conduit space. Since the quality of collateral financed by the agencies, banks and insurance companies is higher, we expect the tier 1 properties to be well bid, while properties in secondary and tertiary markets could face difficulties finding avenues to refinance, given the slowdown in conduit issuance.

But another item, generated from the Real Estate Roundtable, indicated that commercial real estate executives appear to have cut back their expectations on economic conditions, citing worries about the pace of recovery and other concerns.

The Roundtable’s latest Sentiment Index fell for the second consecutive quarter to its lowest point since fall 2009. After rising slightly at the beginning of the year (77 out of 100), the index fell to 69 in the third quarter and to 59 in the latest survey. Respondents cited concerns about the pace of economic recovery; Washington’s ability to address fiscal and tax policy challenges; new regulatory requirements; and the long-term European debt situation as negative factors.

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Further Reference:
MBA’s 3Q Commercial Real Estate Report